VF Corp revenues increase 8 percent in FY14

VF Corporation for the full year ended January 3, 2015 reported revenue rise of 8 percent to a record 12.3 billion dollars, compared with 11.4 billion dollars in 2013, driven by continued strength in our Outdoor & Action Sports coalition, and international and direct-to-consumer businesses. On a currency neutral basis, revenue increased 8 percent for the year. In the fourth quarter, revenues rose 9 percent to 3.6 billion dollars and on a currency neutral basis, revenues increased 11 percent over the 2013 quarter.

“Our powerful brands and the competitive advantage of our business platforms combined with our relentless focus on operational excellence delivered another year of strong returns for our shareholders,” said Eric Wiseman, VF Chairman, President and Chief Executive Officer, adding, “Our four largest brands: The North Face, Vans, Timberland, and Wrangler, along with many of our other brands, were strong performers as we grew our business in every region and channel around the world. We are very pleased to report that Vans passed the 2 billion dollar mark in 2014 to become VF’s second 2 billion dollars brand along with The North Face.

Gross margin for the fourth quarter improved 80 basis points to a record 49 percent driven primarily by the continuing shift of revenue mix toward higher margin businesses. Operating income on an adjusted basis grew 14 percent to 578 million dollars, compared with 508 million dollars in the same period of 2013. On a GAAP basis, fourth quarter operating income was 182 million dollars. Adjusted operating margin improved to 16.2 percent, compared with 15.5 percent in the fourth quarter of 2013. On a GAAP basis, operating margin was 5.1 percent in 2014. Adjusted earnings per share increased 20 percent to 0.98 dollars per share compared with 0.82 dollars per share during the same period last year. On a GAAP basis, earnings per share were 0.28 dollars.

Full year gross margin improved 70 basis points to a record 48.8 percent, compared with 48.1 percent in 2013. Operating income on an adjusted basis grew 11 percent to 1.8 billion dollars, compared with 1.6 billion dollars in 2013. On a GAAP basis, full year operating income was 1.4 billion dollars in 2014. Adjusted operating margin was 14.9 percent in 2014, compared with 14.4 percent in 2013. On a GAAP basis, operating margin was 11.7 percent in 2014. Adjusted earnings per share increased 14 percent to 3.08 dollars per share compared with 2.71 dollars per share in 2013. On a GAAP basis, full year earnings per share were 2.38 dollars.

Fourth quarter revenues for the Outdoor & Action Sports coalition increased 13 percent (up 16 percent currency neutral) to 2.2 billion dollars. Full year revenues increased 13 percent in 2014 or 14 percent on currency neutral basis. Fourth quarter revenues for The North Face brand rose 12 percent or14 percent on currency neutral basis including a 30 percent increase in direct-to-consumer sales. By region, The North Face brand’s revenues were up at a mid-teen percentage rate in the Americas, up more than 25 percent in Asia Pacific and down at a mid-single-digit rate in Europe. For the full year, revenues for The North Face brand grew 11 percent or 12 percent on currency neutral basis to reach 2.3 billion dollars.

Revenues for the Vans brand in the fourth quarter were up 17 percent or 20 percent on currency neutral basis with 30 percent growth in its direct-to-consumer channel and strong wholesale growth. Revenues in the Americas region were up 20 percent in the quarter, up more than 50 percent in the Asia Pacific region and down slightly in Europe due to the changes in foreign currency. On a currency neutral basis, Vans brand revenues in Europe were up at a high single-digit rate in the quarter. Revenues for the full year were up 17 percent.

Revenues for the Timberland brand were up 11 percent or 15 percent currency neutral in the fourth quarter driven by balanced wholesale and direct-to-consumer gains. In the Americas region, revenues were up nearly 25 percent driven by significant wholesale growth and strong direct-to-consumer sales. In Asia Pacific, fourth quarter revenues were up at a mid-single-digit percentage rate. And in Europe, the Timberland brand was down at a low single-digit rate. Full year Timberland brand revenues were up 13 percent to 1.8 billion dollars, or an increase of 15 percent on a currency neutral basis.

Fourth quarter global revenues for the Wrangler brand were up 3 percent or up 6 percent currency neutral driven by strength in the Americas region, including a low-teen increase in its western specialty business and low single-digit growth in the US mass channel. Wrangler brand revenues in Europe were down 4 percent but up 5 percent currency neutral and down slightly in Asia Pacific. Full year revenues for the Wrangler brand increased 2 percent or 4 percent currency neutral to reach 1.7 billion dollars.

Global revenues for the Lee brand in the fourth quarter were up 2 percent or 5 percent currency neutral driven by a high single-digit percentage increase in Asia Pacific and a high single-digit percentage increase in Europe. This was offset by flat results in the Americas region where the business continues to work through ongoing challenges in the US mid-tier channel. For the full year, global Lee brand revenues were down 2 percent or1 percent currency neutral at 1.0 billion dollars.

Operating income for Jeanswear in the fourth quarter rose 5 percent to 142 million dollars. Operating margin increased 40 basis points to 18.7 percent in the quarter, and was down 60 basis points for the full year to 18.8 percent due to challenges primarily related to the US business. Imagewear revenues were up 4 percent and up 5 percent currency neutral in the fourth quarter to 298 million dollars driven by particular strength in the Licensed Sports Group (LSG) business. For the full year, revenues for the Imagewear coalition were up 4 percent to 1.1 billion dollars including growth in both the Image business driven by new product introductions in Red Kap and Bulwark brands and the LSG business, which had strong demand for National Football League and Major League Baseball products.

Sportswear fourth quarter revenues increased 4 percent to 215 million dollars. Nautica brand revenues were flat with a low-teen percentage rate increase in the direct-to-consumer business being offset by a high single-digit decline in wholesale sales. The Kipling brand’s US business achieved a 25 percent increase in revenues compared with the same period last year. For the year, Sportswear coalition revenues were up 4 percent. Globally, the Kipling brand grew 13 percent in the fourth quarter, up 18 percent currency neutral. Contemporary Brands coalition fourth quarter revenues were down 1 percent and up 1 percent currency neutral, to 107 million dollars.

International revenues in the fourth quarter grew 5 percent, or 13 percent on a currency neutral basis. Revenues in Europe were down 1 percent and up 8 percent currency neutral and in the Asia Pacific region were up 17 percent or up 20 percent currency neutral, including 20 percent growth in China. Revenues in the Americas (non-US) region were up 9 percent or up 19 percent currency neutral). International revenues were 33 percent of total VF fourth quarter sales compared with 34 percent in the same period of 2013. For the full year, international revenues represented 38 percent of total VF sales, the same as in fiscal 2013.

Direct-to-consumer revenues grew 22 percent and up 25 percent currency neutral) in the fourth quarter with strong double-digit increases in all regions of the world and growth in every VF brand with a retail format. Seventy-five stores were opened during the fourth quarter bringing the total number of VF owned retail stores to 1,401. As previously discussed, effective in 2014, VF now includes revenues from its concession locations in its direct-to-consumer business. Direct-to-consumer revenues reached 32 percent of total revenues in the fourth quarter compared with 29 percent in the 2013 period. Direct-to-consumer revenues were 26 percent of total VF revenues in 2014 compared with 24 percent in 2013.

For the fiscal year 2015, VF expects revenue to increase by 8 percent on a currency neutral basis or up 3 percent on reported basis. Direct-to-consumer growth in 2015 will be driven by approximately 150 store openings, comp store growth and an expected increase of more than 30 percent in e-commerce revenues. Gross margin is expected to improve by 40 basis points to reach 49.2 percent, which includes a 30 basis point headwind from changes in foreign currency. Earnings per share, on a currency neutral basis, is expected to increase 12 percent (up 4 percent reported) compared to an adjusted EPS of 3.08 dollars in 2014. VF’s Board of Directors declared a quarterly dividend of 0.32 dollars per share, payable on March 20, 2015.